New EU-wide Timeshare Directive in force by February 2011

2011 has only just begun but it is already a landmark year for the timeshare industry thanks to a new EU Directive that comes into force in February.

The aim of the groundbreaking new legislation is to not only tighten up and improve the way in which timeshare is sold but also strengthen consumer protection quite significantly.

The deadline by which the EU countries must comply is 23 February 2011, and the Directive applies to fractional ownership as well as timeshare.

Commenting on the legislation, Britain’s Consumer Minister Edward Davey said, “These products are often sold across borders, so it’s only right that we have protections in place for consumers that also cross borders. Knowing these regulations are in place will boost consumer confidence and boost business for legitimate traders.”

The ruling, Directive 2008/122/EC, was passed with an overwhelming majority at the European Parliament in Strasbourg on October 22, 2008. It comes into force on 23 February for the “protection of consumers in respect of certain aspects of timeshare, long-term holiday products, resale and exchange” and each EU country will be obliged to comply.

The new Directive will set the conditions for fair trading in timeshares and should go a long way in instilling consumer confidence by implementing measures to protect buyers and help put an end to “pressure selling”.

It’s a major milestone for the industry because while the vast majority of timeshare owners say they are happy with their purchases, it is the unregulated “holiday clubs” and rogue resale companies that taint an otherwise solid and thriving global industry. Vacation ownership is an ever-growing, continually-evolving holiday product with Disney, Hilton, Marriott and Ritz-Carlton among the big names in this sector, renowned for the flexibility, choice, quality, value for money and excellent amenities they offer.

The Resort Development Organisation (RDO), the trade body dedicated to excellence and fair trading in the European vacation ownership industry, welcomes the new regulations. The organization points out that the new conditions for holiday clubs are particularly strict; payments must be divided into equal annual instalments for the length of the contract and the buyer has the right to cancel each year when the annual payment is due. Because of these tighter conditions the RDO believes much of the activity of these clubs will cease as they will be unable or unwilling to operate in a regulated environment.

So how will the consumer benefit? Some of the most significant changes will affect:

• Pre-contractual information (or disclosure)

Traders must provide comprehensive pre-contractual information to enable consumers to make an informed choice prior to being bound by any contract. The requirements for each activity are detailed separately in annexes to the Directive. All advertising and pre-contractual information forms part of the contract. All advertising must specify the possibility of obtaining the pre-contractual information and where it can be obtained, and this information must also be available to the consumer at any time during a promotion or sales event. Pre-contractual information must include details of the cooling-off period, the ban on taking any advance payments during this period, the consumers right of withdrawal, and the necessary forms for them to do so.

• The cooling-off period and right of withdrawal

The Directive applies a universal 14 day cooling-off period with a right of withdrawal during this period without cost to the consumer. It applies a ban on the taking of any money during this period, including a ban on taking deposits through third parties. It places rigorous requirements on traders to provide disclosure information (see above) and considerably extends the cooling-off period in the event of any failures.

• Timeshare protection is expanded to include cruise ships, canal boats, etc
The new Directive extends the scope of timeshare to include canal boats, caravans, cruise ships, etc. excluded by definition in the old Directive.

• Short term holiday products

Current legislation defines timeshare as a holiday product formed by a “contract or group of contracts concluded for at least three years”. But a number of companies devised products and trial packages specifically so that they fell outside of this definition and therefore outside the boundaries of the protection provided by the legislation. Now the new Directive is extending consumer protection to holiday products with “a duration of more than 1 year”.

• Resales

Resale companies will be obliged to provide comprehensive information about the service being offered and will not be able to charge advance payments until the actual sale has taken place or the contract has been otherwise terminated. This should put a stop to the widespread fraudulent activity of the ‘resale’ predators, restore consumer confidence and allow legitimate resale companies to grow their business in assisting timeshare owners to sell their timeshare.

The new Directive will help create a level playing field for businesses by simplifying the UK legislative regime with a single set of regulations to replace the old Timeshare Act. “Holiday clubs” that have not been covered by law will now be subjected to the same regulations, a move which should help put an end to rogue “holiday clubs” and unscrupulous resale companies, and pave the way for a stronger, more unified European timeshare industry.